Finance Minister Michael Noonan announced in the Budget that Nama would build 20,000 homes between now and 2020. More than 90pc of those will be in Dublin.

The new role for Nama has raised fears that the State bad bank may distort the market because it has such a huge portfolio of development land.

But both trade groups and developers believe it will do nothing to spur private sector construction because of the lack of finance available in the market and cost of new construction.

Activate Capital - a fund backed by the Government for housebuilding - offers finance at 14pc. Most other lenders are offering similar rates, while the banks will only fund at most 60pc of a development. The Construction Industry Federation said that until financing was addressed, the Nama plan would have little effect.

Meanwhile, the deputy governor of the Central Bank, Stefan Gerlach, has strongly defended its restrictions on mortgage lending, saying they were already taking the heat out of the property market. The rules demand house buyers have a 20pc deposit and restrict lending levels to 3.5 times salary.

Mr Gerlach said: "The measures may have removed the speculative element (from the property market). This is most evident in the moderation of future house price expectations ...as reported in survey evidence."